Shares of Yandex NV (NASDAQ:YNDX) gained more than 7.25% in yesterday’s trading session after it was announced that Russia’s Federal Antimonopoly Service found Google Inc. (NASDAQ:GOOG) to be guilty of “abusing its dominant market position” in the Russian market. Yandex NV (NASDAQ:YNDX), which operates the leading search engine in Russia, complained that Google Inc. (NASDAQ:GOOG) was bullying its way into Yandex’s Russian search domain by, among other things, requiring that Google’s own search engine be pre-installed on all Android phones sold in Russia, in addition to giving preferential screen placement to Google apps. Likewise, it was reported back in 2014 that some phone manufacturers were unable to pre-install Yandex apps on Android devices. You see, the “dominant market position” in question is not actually in search, in which Yandex leads the Russian market at 60%, but rather in smartphones, which Google controls with a hefty 86% share of the market.
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Yandex clearly stands to be the biggest beneficiary of the ruling and made big gains yesterday as a result. That will prove pleasing to the hedge funds tracked by Insider Monkey, which were bullish on the Russian internet company during the second quarter. The number of funds we track with holdings of Yandex rose to 23 from 19, while the aggregate value of their holdings shot up to $307 million from $251 million, even as shares were up only slightly during the second quarter. Investment firms in our database owned 6.2% of Yandex’s outstanding shares, led by Kerr Neilson’s Platinum Asset Management with over 3.42 million shares. Howard Marks’ Oaktree Capital Management added over 1.59 million shares of Yandex NV (NASDAQ:YNDX) to his portfolio in the second quarter, after previously owning just 65,500 shares.
Professional investors like Neilson and Marks spend considerable time and money conducting due diligence on each company they invest in, which makes them the perfect investors to emulate. However, we also know that the returns of hedge funds on the whole have not been good for several years, underperforming the market. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of these funds, like Yandex, performed far better than their large-cap picks like Google, which is where most of their money is invested and why their performances as a whole have been poor. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? A portfolio consisting of the 15 most popular small-cap stock picks among the funds we track has returned 118% and beaten the market by more than 60 percentage points since the end of August 2012 (see the details).
Google Inc. (NASDAQ:GOOG)’s own shares were down only marginally, by 0.40% yesterday, as the Russian market accounts for only a small segment of its operations. Nonetheless, the ruling will have some repercussions in terms of how the company operates in Russia, and potentially its growth there. It could also prove to be an ill omen as far as other similar antitrust cases Google is facing in the EU. The FAS will issue a full ruling on the case in the next ten days, including its official sanctions against Google.
Unsurprisingly, Google is one of the most popular stocks among the funds in our database, including among the billionaire investors that we track. 115 funds had positions in Google’s Class A shares (GOOGL) as of June 30, while 107 had positions in its Class C shares (GOOG). While those numbers were down from 121 and 108 respectively, the aggregate value of their holdings in both classes of stock totaled $16.8 billion, well up from the $14.2 billion it amounted to at the end of the first quarter. Those bullish investors in the stock were certainly on to something, as Google’s shares have had a very strong third quarter. Billionaire Andreas Halvorsen of Viking Global held the largest position in Google’s Class A shares of those funds within our database, at 2.74 million shares. Boykin Curry’s Eagle Capital Management was the leader of the Class C shareholders, with a position of 1.74 million shares.
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